Groh v. Halloran

• Citation: 448 N.Y.S.2d 680,86 A.D.2d 30
• Parties: Norman D. GROH, Plaintiff-Respondent, v. Edward J. HALLORAN, Carol Halloran, Shelton Towers Associates, Halloran Properties, Inc., and Coford Inc., Defendants-Appellants, Dollar Savings Bank, Carmusz Construction Consulting Corp., Taft International Associates, WWTH Corp., Victor Elmaleh, Arthur Stanton, Frank Stanton and Societe Generale, Defendants.
• Decision Date: 06 April 1982
• Court: New York Supreme Court Appellate Division

Page 680

448 N.Y.S.2d 680

86 A.D.2d 30

Norman D. GROH, Plaintiff-Respondent, v. Edward J. HALLORAN, Carol Halloran, Shelton Towers Associates, Halloran Properties, Inc., and Coford Inc., Defendants-Appellants Dollar Savings Bank, Carmusz Construction Consulting Corp. Taft International Associates, WWTH Corp., Victor Elmaleh, Arthur Stanton, Frank Stanton and Societe Generale, Defendants.

Supreme Court, Appellate Division First Department.

April 6, 1982.

Robert S. Smith, New York City, of counsel (Celia Goldwag, New York City, with him on the brief, Paul, Weiss, Rifkind, Wharton & Garrison, New York City, for defendants-appellants.

Alan J. Firestone, Brooklyn, of counsel (Firestone, Marcovitz & Harris, Brooklyn), for plaintiff-respondent.

Before MURPHY, P. J., and KUPFERMAN, CARRO, MARKEWICH and FEIN, JJ.

FEIN, Justice.

In this action to impose a constructive trust and cancel certain mortgages on two hotels, plaintiff asserts that he was a joint venturer with defendants Edward J. Halloran (Halloran) and Shelton Towers Associates (STA) in the development of the Shelton Towers Hotel. Plaintiff alleges that he and Halloran, as joint venturers, entered into an agreement with Dollar Savings Bank (Dollar), pursuant to which Dollar, through its subsidiary June Holding Corp., (June), agreed to sell the hotel to the joint venture and to finance the purchase. Plaintiff and Halloran agreed to be joint venturers on a 30%-70% basis, respectively, record title to be taken in the name of Halloran or an entity owned or controlled by him "with plaintiff's interest being preserved by his trust in EDWARD J. HALLORAN." Title was taken in the name of STA which (1) paid June $1 million for the deed; (2) assumed Dollar's preexisting first mortgage in the sum of approximately $10 million; and (3) executed another mortgage for $10 million for the reconstruction loan provided by Dollar, subsequently increased to $18 million. The property was renovated by plaintiff and Halloran, culminating in its opening in November, 1978 as the Halloran House.

The complaint alleges that since that time STA and Halloran have failed to recognize plaintiff's ownership interest in the hotel and have not accounted to him for the profits since November 1978. Plaintiff seeks, in the first cause of action, imposition of a constructive trust upon the hotel property and a declaration of his 30% interest in the property. The second cause of action is for an accounting. The third cause of action, pursuant to Article 15 of the Real Property Actions and Proceedings Law, seeks a discharge of Dollar's mortgages, insofar as they affect plaintiff's interest, on the grounds that he did not execute the mortgages and that, at the time the mortgages were made, executed and delivered, Dollar had actual knowledge of his interest.

Plaintiff moved for the appointment of a temporary receiver solely on the basis that on October 2, 1981 Dollar commenced an action in Supreme Court to foreclose the mortgages. Plaintiff alleged that the commencement of the foreclosure action demonstrated that Halloran and STA were operating the property in such a manner as to cause waste and deterioration to the extent that they made the property subject to mortgage foreclosure. It was alleged that if a temporary receiver was not appointed, defendants would continue to operate the hotel for their own benefit and cause plaintiff irreparable harm.

In opposition it was observed that although plaintiff's sole ground for seeking a temporary receiver was Dollar's foreclosure action, Dollar itself had not sought a temporary receiver in that action. It was argued that the institution of the foreclosure action, which was being vigorously defended, did not demonstrate mismanagement or waste which would justify the extraordinary relief of a temporary receivership sought by plaintiff. It was further alleged that negotiations to settle the foreclosure action were then pending, and that payment of all of the allegedly overdue mortgage payments had been made immediately upon the commencement of that action.

While the motion was pending, defendants' counsel, by letter dated October 23, 1981, informed the court that a stipulation settling the foreclosure action had been signed the day before. A copy of the stipulation was attached to the letter which asserted that defendants would shortly be able to advise the court that the conditions referred to in the stipulation had been satisfied, mooting plaintiff's claim.

By letter of plaintiff's attorney, dated October 23, 1981, the court was advised that one of the conditions of the stipulation was vacatur of the lis pendens by November 16, 1981, and that Justice Helman had denied defendants' motion to vacate the lis pendens on October 16, making it impossible for defendants to comply...